Justia Insurance Law Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
Accident Fund Insurance Co. v. Schultheis Insurance Agency, Inc.
Cope, injured on a Kentucky job site, filed a workers’ compensation claim. The subcontractor who hired him for the project, CMC, is based in Southern Indiana, and had an insurance policy with AFICA. Schultheis Insurance Agency procured the policy for CMC, but failed to inform AFICA that CMC did business in Kentucky. AFICA sought a declaration that its policy does not cover Cope’s claim.The district court granted AFICA summary judgment. The Seventh Circuit affirmed. The plain text of the policy is unambiguous: because CMC failed to notify AFICA until after Cope’s accident that it was working in Kentucky, AFICA is not liable for Cope’s workers’ compensation claim. The policy states : “If you have work on the effective date of this policy in any state [other than Indiana], coverage will not be afforded for that state unless we are notified within thirty days.” View "Accident Fund Insurance Co. v. Schultheis Insurance Agency, Inc." on Justia Law
Greenbank v. Great American Assurance Co.
Greenbank purchased “Thomas” for $500,000, for use as a competitive showhorse. Greenbank obtained insurance from GA that included coverage for Thomas’s “death” or “authorized humane destruction.” In February 2018, Thomas became sick. Over the next few months, Thomas lost 50 pounds and developed cellulitis in all four legs and uveitis in his eye. In April 2018, Greenbank reported Thomas’s pneumonia to GA. Greenbank's veterinarian informed GA that Thomas “probably” needed to be euthanized. GA retained its own veterinarians. Thomas was transported to its facility, where Dr. MacGillivray advised that it would not be unreasonable to make a euthanasia recommendation but she wanted to try treatment. Greenbank objected, arguing that treatment would destroy Thomas’s future athleticism. After his surgery, Thomas made a "remarkable" recovery. Thomas is still doing well.GA denied coverage for certain treatments and rejected Greenbank’s renewal payment of $14,725.000, citing her failure to provide immediate notice of Thomas’s illness in February 2018. Greenbank argued that GA acted in bad faith by unreasonably withholding consent for authorized humane destruction and that GA’s continued care and control over Thomas after the policy terminated constituted conversion and theft.The Seventh Circuit affirmed the dismissal of her claims. Thomas saw three veterinarians in five months; no veterinarian certified that Thomas needed to be euthanized. Nothing in the contract requires GA to protect Thomas’s use as a show horse. Greenbank never made an unqualified demand for Thomas’s return nor did she establish that any demand would have been futile. View "Greenbank v. Great American Assurance Co." on Justia Law
Sun Life Assurance Company of v. Wells Fargo Bank, N.A.
Corwell’s insurance broker told him that Coventry would essentially provide free life insurance for a couple of years before an assignment of the policy to those who had funded it from the beginning, at no expense or risk to the insured. In 2006, Corwell, age 78, applied to Sun Life for a $5 million life insurance policy, indicating that his family L.P. would be the primary beneficiary and Corwell would be the owner. The annual premium, $300,000 per year, exceeded Corwell’s income almost every year. Corwell falsely stated that the premiums would not involve premium financing. Sun would not have issued the policy if it had known that Corwell would be using a non-recourse loan to pay the premiums. At the end of the loan’s 30-month term, Coventry notified Corwell that the balance was $569,572; Corwell could either repay it or relinquish the policy. As expected, Corwell relinquished the policy, which the lender sold to Coventry. Sun Life rejected a 2017 death claim and sought a declaratory judgment that the policy was void as an illegal wagering contract, procured for the benefit of strangers who lacked an insurable interest, in violation of Illinois law. The district court granted Sun summary judgment and allowed it to keep almost all of the premiums.The Seventh Circuit affirmed with the exception of part of the premiums. Illinois law looks beyond the form of the transactions and considers the substance to determine whether a purchase was supported by an insurable interest. This funding arrangement was an unlawful wager by strangers on Corwell’s life. View "Sun Life Assurance Company of v. Wells Fargo Bank, N.A." on Justia Law
Circle Block Partners, LLC v. Fireman’s Fund Insurance Co.
Circle Block owns and operates a downtown Indianapolis hotel with more than 200 guest rooms, a business center, and spa and fitness facilities. In March 2020, state and county governments adopted public health measures in response to the spread of COVID-19, prohibiting public gatherings of more than 50 people. An Indiana stay-at-home order restricted travel and mandated the closure of all non-essential businesses. Hotels were considered essential businesses “to the extent they are used for lodging and delivery or carryout food services.” By March 19, only six guest rooms were occupied. A month later, the hotel suspended operations, while continuing to incur expenses. Circle Block filed an unsuccessful claim under its commercial property insurance policy, which included business income and extra expense coverage, civil authority coverage, dependent property coverage, communicable disease coverage, and business access coverage; each required “direct physical loss or damage” to property. The policy had a “mortality and disease” exclusion.The Seventh Circuit affirmed the dismissal of the case and denied a motion to certify questions of state law to the Indiana Supreme Court. Circle Block did not allege any direct physical loss or damage; a mere loss of use or functionality was not sufficient. Nor were allegations that virus particles had attached to surfaces at the hotel enough to show direct physical loss or damage. View "Circle Block Partners, LLC v. Fireman's Fund Insurance Co." on Justia Law
USA Gymnastics v. Liberty Insurance Underwriter, Inc.
Larry Nassar, who was affiliated with USAG, sexually assaulted hundreds of female athletes. After Nassar’s conduct was revealed, USAG faced multiple lawsuits and investigations. USAG and its insurers, including Liberty, litigated questions about insurance coverage in an adversary proceeding before a bankruptcy court. In a previous appeal, the Seventh Circuit affirmed the decision that Liberty had a duty to defend USAG. There were ancillary disputes over the amounts of attorneys’ fees that Liberty owed USAG. While an appeal was pending, USAG sought to enforce the order entitling it to reimbursement. Liberty resisted, asserting that large portions of the fees USAG claimed were not reasonable and necessary. The bankruptcy court recommended that the district court award USAG nearly all the requested fees. The district court adopted most of the bankruptcy court’s findings and entered judgment for USAG.The Seventh Circuit affirmed. The lower courts correctly concluded that USAG was entitled to a presumption that the fees it incurred were reasonable and necessary despite Liberty’s challenges to the nature of USAG’s supervision of outside counsel and the proportion of fees paid by USAG. The particular form of supervision suggested by Liberty and the policyholder’s full payment of all the fees it incurred are not prerequisites for that presumption. Liberty failed to rebut the presumption. View "USA Gymnastics v. Liberty Insurance Underwriter, Inc." on Justia Law
Levy v. West Coast Life Insurance Co.
In 2001, Levy, a 37-year-old single mother of two, purchased a 20-year term life insurance policy from West Coast, with a $3 million benefit payable upon her death to her sons. In January 2019, Benita—in deteriorating physical and mental health—missed a payment. Approximately five months later, she died, having never paid the missed premium. West Coast declared the policy forfeited.Levy's sons filed suit, alleging breach of contract and that a late-2018 missed-payment notice failed to comply with the Illinois Insurance Code, which forbids an insurer from canceling a policy within six months of a policyholder’s failure to pay a premium by its due date (calculated to include a 31-day grace period) unless the insurer provided notice stating “that unless such premium or other sums due shall be paid to the company or its agents the policy and all payments thereon will become forfeited and void, except as to the right to a surrender value or paid-up policy as provided for by the policy.” West Coast’s 2018 notice incorporated much of the statutory language. The Seventh Circuit affirmed the dismissal of the complaint. The Notice adequately alerted policyholders to the consequences of nonpayment; there was no need for the Notice to mention the company’s agents as alternate payees. View "Levy v. West Coast Life Insurance Co." on Justia Law
North American Elite Insurance v. Menard, Inc.
The Seventh Circuit affirmed the judgment of the district court dismissing North American Elite Insurance Company's (North American) claims against Menard, holding that there was no error.After a Menard employee hit a customer with a forklift the customer brought a negligence suit against Menard and its employee in state court. Menard carried two levels of personal injury liability insurance at the time. Liability exceeding $3 million fell under an umbrella policy with North American. The jury returned a $13 million verdict, which was reduced to a $6 million settlement. North American indemnified Menard for liability in excess of $3 million then brought this action against Menard in federal court, arguing that Menard violated its duties under Illinois law by rejecting a settlement offer and proceeding to trial. The district court dismissed all claims. The First Circuit affirmed, holding that North American was not entitled to relief on its claims of error. View "North American Elite Insurance v. Menard, Inc." on Justia Law
AFM Mattress Company, LLC v. Motorists Commercial Mutual Insurance Co.
AFM ran 52 mattress stores in Indiana and Illinois. Motorists insured AFM with a policy covering loss of Business Income, Extra Expense, and loss due to actions of a Civil Authority. An exclusion applicable to all coverage stated: We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. During the COVID-19 pandemic, the governors of Illinois and Indiana ordered the closure of businesses. AFM was forced to cease business activities at all of its stores. AFM submitted a claim for coverage. Motorists denied it.AFM sought a declaratory judgment in Illinois state court. The judge dismissed the case with prejudice, based on the Virus Exclusion, rejecting a claim of “regulatory estoppel.” AFM claimed that Motorists misrepresented the Virus Exclusion to the Illinois Department of Insurance so that the regulators would approve it. The Seventh Circuit affirmed. Illinois does not recognize regulatory estoppel. The Virus Exclusion unambiguously precludes “civil authority” coverage. View "AFM Mattress Company, LLC v. Motorists Commercial Mutual Insurance Co." on Justia Law
Canter v. AT&T Umbrella Benefit Plan No.3
Canter worked as a premises technician, installing wires, lifting heavy loads, and climbing tall ladders. After he began to suffer from severe migraines, lightheadedness, and dizziness, Canter concluded that he no longer could perform that work. He applied for short-term disability benefits in February 2017 through an AT&T plan. The plan administrator granted benefits for a few months, but AT&T terminated benefits after an independent medical reviewer concluded that Canter’s medical tests were normal and that his symptoms had improved. After Canter unsuccessfully appealed this decision using AT&T’s internal processes, he sued under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. 1132.The district court granted the defendants summary judgment in favor of the defendants. The Seventh Circuit affirmed the decision but reversed the court’s award of $181 in pro hac vice fees to the defendants as not taxable “costs” under 28 U.S.C. 1920. Extensive medical testing consistently yielded normal results, even though the medical providers and reviewers thought that a significant problem would have shown up in one or more concrete, physiological ways. Canter himself reported that he was experiencing improvement. View "Canter v. AT&T Umbrella Benefit Plan No.3" on Justia Law
Legend’s Creek Homeowners Associaton, Inc. v. Travelers Indemnity Co. of America
In September 2016, Legend’s Creek filed a claim with Travelers for hail and wind damage that had occurred in May 2016 to the north-facing sides of insured condominium buildings. Legend’s Creek retained Kassen to negotiate the claim with Travelers’ agent Knopp. The two initially agreed to repair the north-facing sides of the buildings. Travelers issued a $644,674.87 check. In January 2017, Kassen informed Knopp that the repairs were unacceptable. Travelers investigated and submitted additional checks of $238,766.88 and $28,438.02. Kassen told Knopp that the north-facing sides had to be completely replaced. Travelers agreed and, in February 2018, submitted an estimate. Less than three weeks before the contractual deadline to file suit Kassen demanded the replacement of all sides of the buildings because the new sides did not match to his satisfaction the undamaged ones. Knopp informed Kassen that Travelers would only replace the damaged north-facing sides and paint them to match.Legend’s Creek sued, alleging breach of contract and bad faith. Travelers argued that the lawsuit was brought outside the two-year contractual window and later moved to compel Travelers to submit to an appraisal. The magistrate compelled an appraisal for discovery purposes. The appraiser granted an “award” to Legend’s Creek based on the mismatched sides. The district court granted Travelers summary judgment. The Seventh Circuit affirmed, citing the limitations clause and rejecting claims of waiver. View "Legend's Creek Homeowners Associaton, Inc. v. Travelers Indemnity Co. of America" on Justia Law